Mar 1 2024: Gold prices remained steady in Asian trading on Friday, inching close to breaking above key levels fueled by overnight data that bolstered hopes of potential interest rate cuts from the Federal Reserve amidst easing inflation.
Spot prices of the precious metal hovered near a trading range of $2,000 to $2,050 an ounce, a significant threshold established throughout much of 2024.
However, the resilience of the US dollar tempered further gains in gold, as the greenback strengthened in overnight trading and maintained its robustness during the Asian session.
Spot gold held firm at $2,043.64 an ounce, while gold futures expiring in April dipped by 0.1% to $2,051.95 an ounce by 00:24 ET (05:24 GMT). Both instruments experienced gains ranging from 0.4% to 0.6% on Thursday, also benefiting from month-end purchasing following a relatively subdued performance throughout February.
In addition to gold, other precious metals also saw advances on Friday. Platinum futures rose by 0.3% to $885.45 an ounce, while silver futures increased by 0.3% to $22.953 an ounce.
Focus on PCE Data and Potential June Rate Cuts
PCE price index data, the Federal Reserve’s favored inflation measure, showed an anticipated easing in January, as revealed in Thursday’s data. This reading fostered optimism that inflation might recede in the forthcoming months, potentially prompting the Fed to consider rate cuts in June.
Despite these indications, the CME Fedwatch tool demonstrated only a marginal increase in traders’ expectations for a rate cut in June, with bets on maintaining the status quo remaining steady.
Several Fed officials cautioned that persistent inflation could deter the central bank from hastening policy loosening, suggesting that any future upward movements in inflation could diminish prospects for a June rate cut.
The trajectory of precious metal prices in the upcoming months is expected to hinge on inflation prints for February and March, given their historical correlation with US rate expectations over the past two years.
Rising rates have historically weighed on gold and other metals, increasing the opportunity cost of investing in commodities.
Copper Reacts Mutedly to Mixed China PMI
Among industrial metals, copper prices experienced a slight decline on Friday following mixed economic signals from China, the top importer of the metal.
Copper futures expiring in May edged lower to $3.8453 a pound.
Official purchasing managers index (PMI) data from China indicated the country’s manufacturing sector contracted for the fifth consecutive month in February, signaling potentially diminished copper demand.
However, non-manufacturing activity received support from the Lunar New Year holiday, while a private survey indicated expansion in the manufacturing sector.